Bombardier Inc. handily beat analyst forecasts as it reported a 53 per cent jump in quarterly profits Wednesday. The reaction today? A slew of price target cuts and at least one downgrade.
The Street is looking past the strong results and growing increasingly concerned by the deteriorating economic environment and the impact it will have on demand for new aircraft orders.
Among the harshest is Raymond James Ltd. analyst Steve Hansen, who brought down his rating to “market perform” from “outperform” and slashed his price target to $5.75 from $8.25.
“Several factors lead us to believe that Bombardier's aerospace outlook has become more muted,” Mr. Hansen said in a research note. “Most notably, intensifying concerns over global economic growth are reportedly beginning to push new aircraft orders ‘out to the right’ as business jet customers encounter tightening lending standards (and falling net worth), and commercial aircraft buyers re-evaluate their own growth prospects.”
“The global economic outlook has hastily retreated, in our view, and management commentary suggests aircraft demand is already proving vulnerable,” he added.
While the stock may appear cheap, Mr. Hansen believes there are plenty of other companies with a more favourable risk-reward scenario.
Canaccord Genuity analyst David Tyerman cut his price target by 75 cents to $8.25 and CIBC World Markets Inc. analyst Michael Willemse cut his by 50 cents to $8. Both cited concerns over the outlook for regional aircraft demand, but maintained buy ratings.
Desjardins Securities Inc. analyst Michael Goldberg has upgraded Canadian Imperial Bank of Commerce to a “buy” following its third-quarter earnings beat and unexpected dividend hike. While shares trade at a relatively low price-to-earnings ratio, he’s concerned where growth will come from in the longer term. “We view this as a trading call rather than an indicator of sustained improvement in operating performance,” he said.
Upside: Mr. Goldberg raised his price target by $4 to $90. Canaccord Genuity analyst Mario Mendonca raised his price target by $4 to $86, citing similar concerns about the sustainability of the strong third-quarter results.
The uranium sector appears to be reignited again thanks to the $520-million hostile bid from Cameco Corp. for Hathor Exploration Ltd. , with shares in several uranium production and exploration firms rising since last week’s announcement.
One of the biggest gainers has been Fission Energy Corp. , rallying about 40 per cent since Aug. 24, amid speculation it could become the next takeover target in the sector.
Versant Partners analyst Rob Chang today outlined why it’s not a bad bet for investors to take, noting that Fission owns a majority stake in potential ore bodies adjoining Hathor’s Roughrider deposit.
“It is our view that if Cameco is successful in its acquisition of Hathor Exploration’s Roughrider deposit, the company will turn its attention towards the acquisition of Fission Energy as its shallower lying J-Zone and J-East zones would be the natural “starting point” along the path of mining uranium from the deeper Roughrider deposit,” he said.
Upside: Mr. Chang has a $1.50 price target on Fission Energy, with a “buy (speculative)” rating.
Fortress Paper Ltd. is moving ahead aggressively “on all fronts” in terms of expansions, upgrades and accelerating profits, yet its shares are down more than 50 per cent from their 52-week highs, noted Dundee Securities Corp. analyst Richard Kelertas. “We strongly advise investors to use this weakness to buy FTP's shares on the cheap ahead of upcoming positive catalysts,” which include the October start-up of dissolving pulp production at its Thurso mill in Quebec and the possibility of several new banknote paper contracts, he said.
Upside: Mr. Kelertas has a 12-month target price of $70, and rates the stock as a top pick in the small cap sector.
North American Energy Partners has been awarded a $127-million contract from Syncrude covering construction work for the relocation of an ore crushing facility. While largely expected, CIBC World Markets Inc. analyst Jeff Fetterly suggests it positions the company to win a future contract covering the second phase of the project.
Upside: Mr. Fetterly raised his price target by 50 cents to $7.50 and maintained a “sector performer” rating.